Friday, June 16, 2006

The Impending Tax crisis in New York Sate

Both Gubernatorial candidates in New York are proposing property tax reform which is bordering on the ridiculous. For Spitzer, his plan is a shift to the income and sales tax and for Faso it is a NY prop 13 esque type proposal. I’ve blogged about this before. I won’t repeat what I have already blogged about.

I have no idea which plan is worse. My gut reaction is Faso’s. Spitzers plan will expand the Star program. The criticism of Star is that it doesn’t force Local governments to keep spending down. Duh!

Ok, here is what happens. I go to my job, work, and get taxed. I go home and get taxed on my home property. A year later the state sends me a check. Yay me! I got the free money. In the mean time, the government needed to pay for someone to distribute this money, they needed to pay people to come up with a formula for the right amount to redistribute, they needed to… you get the picture? Why are we taxing people two times anyway? I don’t know.

You might say: Because it is relief for the middle class homeowners. We are taking away from those rich people and giving it to those middle class who most need it. And then I would reply, that might be true if the wealthy earned most of their income through wages or spent that income and was taxed through the sales tax. Remember, the sales tax is extremely regressive because poor people need to consume more of their income for mere survival. The vast majority of the wealth in this country in concentrated in land values. This so called reform is a shift in tax burden away from the wealthy and towards the middle class. However, for the average Joe, they don’t care because they are getting their Star check every year. Even if the above was the case, it would still be highly regressive because the wealthiest individuals would shift their income base away from wages and towards rents, increasing the marginal rate of rent in the process. These higher rents would get passed on to both consumers and to business and would have the opposite effect out esteemed state senate leader is looking for: an exodus of people and business.

REAL property tax reform would revolve around eliminating the Star program, first and foremost, and secondly removing taxation from the improvements on the land and taxing only the land value itself.